GOP Pushing Tax-Break Plans; Small Banks May Get Left Out

Republicans have kicked their tax-cut drive into high gear, but banking lobbyists said Monday that their effort to win tax breaks for small banks this year faces tough odds.

"We know it will be an uphill fight," said Edward L. Yingling, chief lobbyist for the American Bankers Association. Lawmakers "have a limited number of issues they want to deal with."

House Ways and Means Committee Chairman Bill Archer over the weekend unveiled a plan for $80 billion of tax cuts over five years. It would not directly slice taxes for banks, but it contains several provisions that could indirectly help the industry.

Under a "small saver exclusion," 68 million taxpayers would not pay taxes on some interest and dividend income. For instance, a married couple with no dividend income but $10,000 in a savings account earning 4% interest would pay no taxes on the interest their money earns.

The plan, which the committee will vote on Thursday, would accelerate estate-tax credits. The current $625,000 exclusion is not set to reach $1 million until 2006. The proposal would raise the exclusion to $1 million on Jan. 1.

Farmers also would win some long-sought tax relief, including an increase in the net operating loss carryback period. Some lawmakers are still pushing for breaks for small banks.

Rep. Marge Roukema last week introduced legislation that would make it easier for community banks to convert to so-called S corporations, which are exempt from corporate taxes because all profits are passed directly to shareholders. The New Jersey Republican's proposal is identical to a bill that Sen. Wayne Allard, R-Colo., introduced in July. Rep. E. Clay Shaw Jr., R-Fla., also has offered legislation to expand S corporations.

The Roukema and Allard bills would double the limit on shareholders of these companies to 150 from 75, let investors hold S corporation stock in individual retirement accounts, remove limits on investments held for supervisory or liquidity purposes, and loosen other restrictions.

Lobbyists said getting the tax breaks for small banks enacted this year will be difficult because they are expected to be costly and easily overshadowed by cuts for the general public.

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